Foster + Partners has said it is ‘shocked and disappointed’ after losing a High Court battle over an unrealised hotel scheme which would have cost its client more than double the original budget
Last week the UK’s largest practice was ordered to pay £3.6 million to compensate Riva Properties as a result of the ballooning budget on a proposed 600-bed, five-star hotel project near Heathrow.
Foster + Partners, which said it would review ‘what lessons should be taken’ from the case, began working on the scheme in 2007, having been formally instructed to carry out RIBA Stages A-L, equivalent to the current RIBA work stages 0-6.
The seven-storey hotel would have also featured seven subterranean floors and would have been surrounded by a glass biosphere. The scheme was approved by the London Borough of Hillingdon in 2009.
In his evidence, developer John Dhanoa, who owns Riva, said he had told Foster + Partners that the initial budget was £70 million.
However, when Fosters’ design was costed by an external company (EC Harris) in 2008, the estimated construction cost came in at £195 million.
At that point Dhanoa agreed to increase the budget to £100 million, ‘in reliance upon Fosters telling him that the project could be “value engineered” down to that figure’.
However Dhanoa could not obtain funding for the scheme, which he later discovered could not possibly be value engineered so low.
He could not build the scheme that Fosters had designed for him, and which had cost him a total of approximately £4 million in professional fees – half of that being paid to Fosters and the other half to the ‘other members of the sizeable professional team and in other fees’.
Riva Properties and three other companies involved in the project pursued the architect over the fees, loss of profits and for the money needed to find a design team which could stay on budget. The dispute eventually led to an 11-day trial.
Dhanoa claimed three key alleged breaches of the architect’s duty to exercise reasonable care and skill in their professional performance.
The first – that the practice had failed to carry out RIBA stages A and B, including not establishing a budget – meant that Riva was left with a hotel design costing more than twice its original intended budget to build.
The second breach was that Fosters had advised the developer, following the £195 million costings, that the hotel design could be value engineered to a price within the £100 million budget. The client’s expert witnesses later found it to be ‘blindingly obvious’ that this could not be done.
Lastly, the client accused Fosters of failing to warn Riva that it would not be possible to value engineer the project to meet the budget.
In a lengthy judgement last week, Justice Fraser ruled in favour of Riva Properties and three other businesses on each of the three alleged breaches. He awarded the client £3.6 million for the fees required to find a new design for the hotel within budget and obtain planning permission.
Responding to the decision, a statement from Foster + Partners reads: ‘We are shocked and disappointed by the judgment. We do, however, take the judge’s comments seriously and are undertaking a review led by our independent directors, supported by Travers Smith, an independent law firm, to see what lessons or actions should be taken from this case.’
The claimants’ lawyer, Stephen Homer, a partner at law firm Ashford, said: ‘This case serves as a warning to designers that they cannot design in a vacuum.
‘Cost and budget is a key constraint and should always be identified and considered when designing any project, even when the provision of cost advice is expressly excluded from the designer’s obligations.’
A further hearing will determine costs in the case.